Beware After-Market Auto Warranties From Third Parties

The Better Business Bureau sent out an alert that it’s been bombarded with complaints about extended auto warranty companies. Gripes include deceptive sales practices — including high-pressure phone sales tactics to get customers to pay upfront for contracts they can’t see — as well as insurance fraud.

The BBB offers the following advice to keep in mind if you’re considering an after-market car warranty:

*Don’t give out personal info over the phone or email unless you’re ready to buy a warranty.

*Don’t let a salesman force you into making an abrupt decision. Some sales agents offer a better rate if you offer an early commitment.

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I purchase SquareTrade warranties for many of my electronics. I have only used the service once, but it was on a $800 tv, so the $70 for the warranty kept me from having to pay out of pocket for a new tv. Square Trade PayPal’d me the money after they had a technician come to my home and verify that the TV would cost over $1200 to repair. 3rd party warranties are a rip off in the store though, stay away.

I’ve often wondered why, for example, the Square Trade warranty offered for my Panasonic TV runs concurrently with the Panasonic 1 year warranty. So when you buy the Square Trade three year warrantly, it’s really only for the two years after the manufacturer’s warranty expires. Can anyone give me a better understanding of how that works? I have a window of a few more weeks left to purchase the Square Trade warranty, and that part has always bugged me.

For what Square Trade wants vs. what I paid for the TV, it seems to be a reasonable gamble as long as you know what’s covered going into it.

Well, you have 90 days after you purchase the item to get the warranty, so you basically get 2 years and 3 months I think. If you do a Google search, you can always find Squaretrade coupons for 30% off or more, so that just brings the cost of the warranty down even lower.

My Panasonic warranty is for one year, parts and labor. I have to buy the Square Trade warranty by the three month point, max. That’s the part that makes no sense to me. It seems like calling it a three year warrranty is misleading since there’s no way you could get three years of coverage out of it unless the item you bought it for has only a three month long warranty. I’d be paying for 9 months of overlapping coverage, and Square Trade’s fine print says the Panasonic warranty applies when it’s still valid, not their’s.

A better way to do it would be if you had to buy the Square Trade warranty by the three month mark, and then it didn’t kick in until after the Panasonic warranty had expired at the end of one year. That gets you a total of four years of coverage, as you might expect. That’s the ‘buyer beware’ part of a warranty like that, I guess. Everything else seems to be OK about it and I think I’m going to do it anyway next month.

I agree that it would be better if the warranty kicked in after the manufacturer’s warranty had expired, but even for 2 extra years of coverage it’s a pretty good deal, especially since they usually just cut you a check.

This is the same way Best Buy and other major retailers state their extended service plans.

I don’t consider it deceptive for a few reasons:

* It is clear to understand you are covered for x number of years from the original purchase date.

* Some electronics warranties are 90 days labor, one year parts (a manufacturer ripoff). If the item breaks six months from now the manufacturer pays $5 for the part; you cough up the $100 for labor.

* Most extended warranties cover lightening/power surge issues from day one. Manufacturer warranties don’t cover this at all. In addition, Square Trade offers optional accidental damage coverage on most items. If you drop your digital camera or spill coffee on your notebook PC this will save you the cost of replacing it.

I find it a total ripoff too. Back when I worked at Lowe’s, the extended warranties they offered on appliances were 3 or 5 years PLUS whatever the manufacturer’s warranty was. So if you bought an appliance with a 2 year factory warranty and bought the 3 year extended you got a total of five years.

The downside to freedom of information. whenever you buy something expensive, the rats come out of the woodwork and try to get you to buy insurance on it. After years, I STILL get solicitations for various home insurances scams.

I have received 3 ‘shady’ cards for the past two weeks. They read something like “Your factory warranty is about to expire, extend now.’
Thank god I am car savvy and I do 100% of my car repairs at home. (that includes and engine swap once)

I made the mistake once of buying a 3rd party warranty with a brand-new truck I bought once – instead of paying more for the Chrysler warranty.

Although I only needed to use it a couple of times, all the hoops I had to jump through to get anything approved and paid for completely negated any possible cost savings vs. the manufacturer warranty.

Every vehicle I’ve bought since then has been accompanied by an extended warranty from the manufacturer themselves.

I’ve bought a 3rd party warranty before when I’ve picked up a used car. They usually work out in my favor, although that’s only because I’ve had some expensive fixes. A few things I’ve learned….

Read the contract pamphlet and look for the clause explaining what is and what is not covered, and make sure you understand it. Sure, maintenance and general wear and tear usually isn’t covered, but look for vague language.

You buy the warranty when you buy the car, but if the car you’re buying is used and still has a factory warranty on it, you’re essentially giving them money for nothing. Make sure the policy is prorated based on when it takes affect, and that it won’t expire before you get a chance to be protected by it.

The only after market warranty I ever purchased was for my cell phone I bought off NewEgg. I paid like $25 I think but it did come in handy, my crazy ex decided to break my phone into pieces and the warranty sent me a check for the price of the phone a lot quicker than I anticipated they would.

Here’s a great tip for buying a factory warranty: If you live in an “expensive” state (e.g., New York) you can call any dealership of your car make in the country to get a quote on a new car warranty. I’ve done this with GM MajorGuard and Toyota where I called random dealerships in Montana and Florida to get the same contract between 30-40% cheaper – with no sales tax too!

This is a great suggestion. My friend actually was offered a 100,000 mile extended warranty through Subaru in NH when he bought the car. He declined and later found a dealer on a popular Subaru message board who offered the same warranty for $450. They took his VIN number and credit card number over the phone and updated his warranty.

He can go into any dealer in the US and Canada and his new warranty will be accepted. No running through hooks, and probably a bit cheaper than the 3rd party warranties.

In addition to your suggestion David, I would also like to suggest browsing the forums and message boards of your automaker; you may found a friendly dealer who will sell the warranty just over cost.

They also have sneaky ways of denying: Electric window won’t raise / lower: Motor is covered. Regulator, not. The regulator is an integral part of the motor for most makes models, and the regulator is most often the reason for electric window failure. The motor is for all intents and purposes BROKEN, and would otherwise be covered, but because the regulator failed, you are denied.

Any company that offers to sell you an auto warranty if your car is less than 20 years old or has under 200,000 miles will always seem shady to me. They are insuring cars that are on the verge of major breakdowns and they know that you know it also. They are playing on your fears and will be supremely expensive, will deny your claim to the point of you having to file a lawsuit or both.

Check online if you want to purchase a manufacturer’s extended warranty. I did, and saved 2/3 off the warranty. I purchased a new GM vehicle several years ago, and at the time, declined an extended warranty, however, the car had a lot of electrical failures the first 3 years, so I decided that I would extend my warrany an additional 3 years right before the original warrany expired. I went to a couple of the local dealerships, and then looked online and found a dealer out of state that was giving the warranty at his cost (presumably he was getting a high volume discount). I checked out his reputation, and decided everything was on the up and up and purchased the warranty. I paid $400 for a warranty that locally I could find for only $1200,,,great deal for a 4 year extension of the original manufacturer’s warranty.

I keep getting extended warranty offers purporting to be from my local Chrysler dealer – who I bought a car from in 2006. They even have his letter head and logo but are really from a third party. The dealer claims he is innocent but I’m sure he sold a list to the third party – they have too much info that they could only have got from him – and the letters keep coming with his letterhead and logo.

For a while my dad and girlfriend I knew were receiving robocalls saying that their car’s warranty was about to expire and requesting a call back, which was amusing since my girlfriend didn’t own a car. But my dad called the number back to see what the scam was and they asked for his make and model and when he said “1993 Geo Prizm” they just hung up on him.

That’s probably not quite what the article is talking about. But is it really that different?

I bought the factory extended warranty for my used (at the time 2y 8 month old with 29,000 miles) Toyota Solara, a 2 door Camry. My first nice used car besides the beaters in high school and college. LOTS of electronics compared to my older SUVs, enough to worry me about difficult and expensive diagnoses. I rolled the dice and lost, house won. No repairs needed.

When I bought my house, I declined the warranty on the appliances/ heating and AC, etc. Bought the house in January. The AC died on about the second or third use. Started kicking myself for not buying the warranty. Then read the exclusions. Turns out we had a very rare and failure prone type of central AC. It was natural gas powered and I still can’t figure out the physics / thermodynamics on that. And it was specifically excluded in the warranty, one of the few exclusions.

You can power almost any appliance with natural gas if you want to. It still uses some electricity (for controls, usually) but uses the natural gas turbine (or combustion engine) to drive a pump where as a regular electric appliance uses an electric motor. It shouldn’t be rocket science, but the repair people aren’t used to seeing them either.

I purchased an extended warranty on a used motorcycle one time. I got home and after reading it carefully I realized it was a ripoff (nothing that WAS covered was even possible). I went back to the dealer and spoke with the sales person that sold me the bike and the policy.

He read the policy, turning more red as he read. He agreed it was a ripoff, apologized profusely and refunded the money on the spot.

He was so embarrassed I actually felt a little sorry for him. He promised to speak with the owner and stop offering extended warranties from the third party.

I’ve dealt with this dealer several times since and they are the most honest shop I’ve ever dealt with…
The owner being a race fan of my uncle back in the day was VERY helpful with discounts. I think they sold me most items including bikes at little more than their cost.

BBB doesn’t do anything, I tried that with an auto repair shop listing all the problems I was having, the repair shop sent back a letter full of lies, some of which made no sense and could have been easily verified if they were true but offered no proof or details

The BBB closed and ruled in their favor despite that the shop had been repairing my car for 3 months at this point. The super rare car I had that took so long to find parts for: a chevrolet prizm (that is just a rebadged Toyota corolla)

1) These people are not targeting used car buyers. They are targeting anyone with an out of warranty car, including by brother who bought a new Accord in 2004 that is long out of warranty.

2) Why not buy a used car? Both my wife’s and my cars were bought used when they were in the 29-32 month old range with about 27-29k miles. New enough that they still had some factory warranty left for immediate problems, but old enough that there was a goodly amount of depreciation on them already. Bought both of them from dealers and could have sold them for about what we paid for them after driving a couple of hundred miles. Pretty tough to do that with a new car off the lot.

I have a PENN warranty and it covers a bunch of different stuff that can be very expensive (entire engine, transmission, electrical system) but I’ve never had to get anything fixed that was actually covered. Figures.

I bought one when I purchased a truck with only about 25,000 miles on it. The warranty policy was written really well and specifically stated what it did and didn’t cover and the price was resonable so I figured what the hell, as it only added a pittance to my monthly payments. A few years later the truck was hit and declared a total loss so, as per the policy, I went back to the dealer to get the balance of my warranty refunded (should have been about $900) since I obviously would no longer be needing the warranty. Turns out the warranty comany just sold policies for a few years and then completely fell of the face of the Earth, so I never got the money back.

I bought a great 3d party warranty many, many years ago when I still distrusted GM vehicles, but bought a used GM vehicle anyway. I don’t remember the name of the warranty company, though, but they fixed every problem that car ever had.

These days, I’d only buy an extended warranty for a Chrysler, VW, Mitsubishi, or Hyundai though.

Some years ago I bought a 40″ Samsung LCD and paid about $60 for a 3 year warranty from Fry’s. Last year, a few months before the warranty was about to expire, the TV went kaputz and needed a new motherboard. It got fixed just fine a week later. $60 well worth it.

The DMV in most states sells your contact info. (name, address, make/model, VIN #, etc.) to whoever wants to buy it. Marketers can usually choose a set of paramaters (vehicles between 1998-2005, registered Harley-Davidson owners, etc.) to pitch warranties, dealerships or magazines.

What really sucks is that in most states there is no way to “opt out” of this by contacting the DMV.

I was in the middle of a 5 car accident and the love of my life car was totaled. I was 19 away from home and trying to figure out how to buy a car. Not only did I get taken on the car, when it came to signing the paperwork I was told I had to purchase a warranty with it. That warranty came in 3 levels of protection, etc. I ended up paying about half the price of the care for this disaster.
I do have to say though, when my alternator went bad, they covered it, so they saved me SOME money…and it came at a time where that money was badly needed.